Court Ruling Upends Mission Viejo Redevelopment Plans

A lawsuit aimed at protecting city redevelopment agencies from having their funds raided by the state backfired Thursday when California's Supreme Court abolished the agencies altogether.

In July, the Legislature dissolved all of California's redevelopment agencies, but passed a companion law allowing the agencies to continue if they coughed up a portion of their tax revenue to the state. The aim was to help balance California's budget by siphoning $1.7 billion from redevelopment coffers.

Redevelopment supporters sued to overturn both measures. The court agreed it was unconstitutional for the state to shake down redevelopment agencies for tax revenue, but said the Legislature was well within its rights to dissolve the agencies.

The result is that Mission Viejo and hundreds of other cities must phase out their redevelopment agencies once any contracted projects are completed.

Among other projects, Mission Viejo's RDA helped renovate the Shops at Mission Viejo, build affordable housing for seniors and finance Oso and Crown Valley parkway improvements, according to news reports.

Not everyone supported the agency. Earlier this year, city watchdog Larry Gilbert called Mission Viejo "a poster child of agencies who have abused the system."

But the California Redevelopment Association and League of California Cities, the plaintiffs in the lawsuit, called on lawmakers to quickly develop legislation to revive the agencies.

"Without immediate legislative action to fix this adverse decision, this ruling is a tremendous blow to local job creation and economic advancement,'' said association board president Julio Fuentes, adding that it was not the Legislature's original intent to completely abolish the agencies.

Redevelopment agencies are funded by increased tax revenues generated by projects in their areas. The agencies use the revenue to invest in additional projects in areas deemed "blighted."

Supporters of redevelopment argue it is the best economic development tool to spur projects that private investors would otherwise not build.

But critics, such as L.A. County Supervisor Zev Yaroslavsky, said the agencies long ago stopped being a catalyst to reinvigorate blighted neighborhoods. "Unfortunately, over the years, it evolved into a honey pot that was tapped to underwrite billions of dollars worth of commercial and other for-profit projects that had nothing to do with reversing blight, but everything to do with subsidizing private real estate ventures that otherwise made no economic sense,'' Yaroslavsky said.

Gov. Jerry Brown hailed the court's ruling, saying it "validates a key component of the state budget and guarantees more than $1 billion of ongoing funding for schools and public safety.''

-- City News Service contributed to this report.